Envirosuite Limited

EVS Details

Envirosuite Limited (ASX: EVS) is an environmental technology company offering the industry with Software as a Service (SaaS) and solution as a service in managing and mitigating environmental impacts on communities concerning noise, vibration, odour, dust, air quality, and water quality.

Result Performance – For the Fourth Quarter Ended 30 June 2021 – (Q4FY21)

• New ARR Sales: For Q4FY21, the company reported $2.3 million in new ARR sales. New sales were from core focus industries with $1.0 million from Airports, $0.5 million from Waste and Wastewater, and $0.4 million from Mining, and the remaining $0.4 million came from other customer segments. Of new ARR sales, $1.3 million came from existing customers.
• ARR at $46.5 million: New sales along with favourable forex movements of $0.8 million and continued discounts resulted in an increase in ARR to $46.5 million, 9% YOY
• Orders For Non-Recurring Project: The company received $2.4 million of orders for non-recurring projects and hardware of which $1.5 million came from the Airports and $0.4 million came from Mining, and the remaining $0.5 million from other customer segments.

Key Data (Source: Company Reports)

Key Risks:

The company is exposed to a variety of financial risks, mainly related to credit, liquidity, and foreign currency risk. The time horizon and severity of Covid-19 infection primarily in the airport industry also remains a challenge.

Outlook:

As per the quarterly metrics released on 8 July 2021, the consolidation of the sector and region has played a favorable role for the company in the last quarter as it continues to scale for growth. These developments are cementing the strong growth momentum of the company while reducing risk, cost, and complexity. The current focus is on the development of the sales, ramping of resources, and grow in the US market where the company expects strong upside growth based on the serviceable addressable market and the Government’s emphasis on climate change and infrastructure.

The company plans to release FY21 result on 18^th August 2021 with reported recurring and non-recurring revenue, gross margin, and Adjusted EBITDA.

Valuation Methodology: EV/Sales Based Relative Valuation (Illustrative)

Daily Technical Analysis Chart

Source: REFINITIV

Note: Blue color bars reflects daily volumes, Green Color line reflects 21-period SMA, Black Color Line reflects RSI (14-period).

EVS.AX prices are getting upside recovery from lower levels. Prices are now getting resistance of the upward sloping trendline. RSI (14-period) is hovering at overbought region at ~78 on a daily chart that might invite profit booking at higher levels. Volumes are also showing decreasing trend with increase in prices today that suggests upside momentum is weakening. Immediate support levels are $0.117 and $0.099 while immediate resistance levels are $0.155 and $0.167.

Stock Recommendation:

The stock has a 52-week low and high of $0.087 and $0.252, respectively, and is currently trading below the average of 52-week high-low range.

We have applied EV/Sales multiple-based relative valuation (on an illustrative basis) and there are expectations that the stock price might witness a fall of low double-digit (in % terms). We have applied a slight discount to EV/Sales Multiple (NTM) (Peer Average) considering continued losses in the financial performance of the company and negative ROE that stood at -6.4% in H1FY21.

Considering the aforesaid facts, continued net losses, associated risks, and current trading levels, we suggest investors to book profits.

Hence, we give a “Sell” recommendation on the stock at the current market price of $0.13 per share, up 8.333% on 23^rd July 2021. 

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine do not hold interests in any of the securities or other financial products covered on the Kalkine website.